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$4500 Federal Tax Credit is for PERSONAL (not Business) only!

Discussion in 'Prime Main Forum (2017-2022)' started by stevepea, Apr 24, 2017.

  1. stevepea

    stevepea Senior Member

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    I know the $4,502 Federal Tax Credit is talked about in multiple posts, but thought I'd make a new thread to make sure people find this information -- as it's not been talked about.

    Your $4,500 Federal (IRS) Tax Credit will be REDUCED SUBSTANTIALLY if you use your Prime as any kind of business deduction on your taxes with the IRS for the year that you qualify for the tax credit.

    If you don't claim your car as a business expense (miles travelled, percentage of driving used for business vs personal use, etc, to get a deduction on your taxes) then you don't have to worry.

    But I'm sure a lot of people DO use their car as a deduction for business expenses on their taxes. Whatever percentage you say you use your Prime for business will be subtracted from your IRS tax credit!

    In other words, if you say on your tax form that you use your car 70% for business and 30% for pleasure, you get a nice tax deduction (if you file that way) -- but then your $4,500 IRS Tax Credit for the Prime will only be 30% (the portion NOT used for business) -- not 100%. So in this example, you'll only get a $1,350 credit instead of the full $4,500.

    I'm not a tax guy at all, so this is just my own personal suggestion, but for those people who claim their car use as a (even partial) business expense, you might not want to claim your new Prime as a business expense (at least the first year, when you'll get the credit. For the following years it doesn't matter). If you have two cars, it's easy, as you can just continue to use and claim the other car as your business car, and don't claim the Prime as a business expense/deduction. If you only have one car (ie, you trade in your old car when you buy your Prime), you'll want to decide what to do. The more of an exemption you claim for business, the less of the $4,500 you'll get back (and IMHO, it's better to get as much as the $4,500 back, because that's not just a percentage off, but the full thing).

    Just wanted to make sure people are aware of this.
    Back when I got my Honda Civic Hybrid, the IRS was giving a $1,200 tax credit (just like the $4,502 credit for the Prime now). But since I claimed a large percentage of work miles for my car (which was true), the credit was only about $530 instead of the full $1,200.

    By the way, this is for the FEDERAL tax incentive (IRS), NOT any State incentives you may get (if your state offers them). For instance, California doesn't care if you use the car for business or not, you get the full $1,500 (as long as your income isn't over a certain amount), but the IRS does if you also try to use it as a deduction. Basically, the IRS doesn't want you double-dipping. You can't get both the full $4,502 credit AND a break on your taxes by claiming the same car for business use, you have to choose (or use/claim another car for business use).
     
    #1 stevepea, Apr 24, 2017
    Last edited: Apr 24, 2017
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  2. eguigal

    eguigal New Member

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    Sounds like a good strategy to me. Convert the car to business use in the second tax year of ownership and start the depreciation at that point.
     
    #2 eguigal, Apr 24, 2017
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  3. wjtracy

    wjtracy Senior Member

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    Are you sure?
    What is your basis for making this prediction about reduced credit?
    I did a quick and dirty Turbo Tax with 50% business and seem to see the credit gets split 50/50 but the total is still adds up the full amount on Line 55. I am thinking businesses (eg; lease companies) can claim the credit, so the credit is not necessarily only for individuals AFAIK.

    The old 2006/2007 hybrid credit was indeed flawed and many could not take the full credit, but many of those old problems were fixed by the time of Cash 4 Clunkers and PlugIn credits.
     
    #3 wjtracy, Apr 24, 2017
    Last edited: Apr 24, 2017
  4. huskers

    huskers Senior Member

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    Dang, they get you coming and going.
     
    #4 huskers, Apr 24, 2017
  5. stevepea

    stevepea Senior Member

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    As I said, I'm not a tax guy, I could be wrong... 12 years ago, it was definitely the case that you couldn't have both, and looking at the current form, I thought it appeared similar, though I could be wrong.

    It's IRS form 8936 you need to fill out for the $4,502 credit for the Prime.

    Here's the form:
    https://www.irs.gov/pub/irs-pdf/f8936.pdf

    Here's the instructions (similar but slightly different URL):
    https://www.irs.gov/pub/irs-pdf/i8936.pdf

    Anybody out there know their tax stuff that can answer this clearly by looking at this form? Can someone who claims (as a business expense/deduction) the Prime in the year you qualify for the $4,500 get the full amount, between the portion claimed for business and portion claimed for personal use?
     
    #5 stevepea, Apr 25, 2017
  6. davidtm

    davidtm Member

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    I claim unreimbursed mileage related to work (commuting miles, basically), but not the car itself. Is this what this discussion refers to?
     
    #6 davidtm, Apr 25, 2017
  7. wjtracy

    wjtracy Senior Member

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    David- This post refers to those of us self-employed and filing business expenses using Schedule C, which includes optional "business use of car" deductions. FORM 8936 used to claim the Energy Efficient Vehicle Credit asks you to enter "% business use of car"...but it is not yet clear to me that that means the overall Prime/Plug-in tax credit is reduced when used for business.
     
    #7 wjtracy, Apr 25, 2017
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  8. jessetoedtman

    jessetoedtman Junior Member

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    I am curious as well- I am a sales rep ( I work for a company) who intends to write off miles driven for business. Not getting the $4500 may be a deal breaker in my decision to go with the Prime.
     
    #8 jessetoedtman, Apr 26, 2017
  9. RJ Primw

    RJ Primw Member

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    I posted this on another thread a few months ago..learned the hard way when I got my taxes back from the accountant. For me, it was not that much of a reduction, but still, a disappointment because I was set on the 4500.
     
    #9 RJ Primw, Apr 26, 2017
  10. jessetoedtman

    jessetoedtman Junior Member

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    Would you mind sharing your situation with me? Do you write off miles driven as well?
     
    #10 jessetoedtman, Apr 26, 2017
  11. wjtracy

    wjtracy Senior Member

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    Tell us FORM 1040 Line 55 Total Credits. I am thinking there is where your $4502 total shows up.
     
    #11 wjtracy, Apr 26, 2017
  12. JimN

    JimN Let the games begin!

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    Commuting is a personal expense and is not deductible.

    Driving from your home to the office is commuting. Driving from the office to another work site is a business expense.
     
    #12 JimN, Apr 27, 2017
  13. wabclock

    wabclock New Member

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    I work for a company and always claim travel mileage. Before I completed my taxes this year I entered in the Car to see if I would get the 4500 and I got what I normally get back and the 4500. So I imagine it will work next year.
     
    #13 wabclock, May 1, 2017
  14. RJ Primw

    RJ Primw Member

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    When you fill out form 8936, which you will need to in order to get the credit, it will ask about business miles and will adjust the credit.
     
    #14 RJ Primw, May 4, 2017
  15. stevepea

    stevepea Senior Member

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    Right, but what we're not clear on, is if you claim, say, 40% of your miles as a business expense, will the $4502 credit be reduced by 40%? That is what happened 12 years ago with the original IRS credits, and looking at form 8936 it seems (to me) that even today you can't get 100% of the $4,502 if you do so... yet looks to others like you might be able to. So that's why we're hoping a there's a tax guy out there who can tell us for sure.

    Come on.. aren't there any CPAs/tax guys out there driving hybrids? :)
     
    #15 stevepea, May 4, 2017
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